Purified HTLV-I Tax1 protein can be taken up by 70Z/3 lymphoid cells and localized in both the nuclear and cytoplasmic compartments. Introduction of the Tax1 protein into the growth medium of 7OZ/3 cells resulted in the rapid and transient induction of NF-KB binding activity in the nuclear fraction. Taxl activation of NF-kB was not sensitive to either staurosporin or prolonged stimulation with the phorbol ester 12-0-tetradecanoylphorbol-13-acetate, suggesting that Taxl-dependent NF-kB activation did not require the protein kinase C pathway. Purified Taxl did not directly increase NF-KB binding activity in 7OZ/3 cytoplasmic extracts, suggesting that NF-KB induction may require cellular factors. Western blot and competitive radioimmunoassays demonstrated that Taxl protein was present in the tissue culture media of HTLV-I-transformed cell lines. These results show that extracellular Taxl may regulate cellular gene expression in noninfected cells. A purification protocol which involves sequential ammonium sulfate precipitation and zinc chelate chromatography to purify the HTLV-I Taxl protein expressed in E. coli has been developed. The final Taxl product is greater than 90% pure and the yield is approximately 1 mg per liter of liquid culture. The purified Tax protein is biologically active in indirect in vitro DNA binding assays, cellular NF-KB induction experiments and lymphocyte proliferation assays.